ba102 quiz (winter 2025)

Joe Joulakh

Internal stakeholders of a company (3)

employees, manager, owners

External stakeholders of a company (6)

suppliers, society, government, creditors, shareholders, customers

The two types of factors that may affect a company

Macrofactors (PESTEL) and Industry Factors

What does PESTEL stand for?

Political, Economic, Sociocultural, Technological, Environmental, Legal

Example of key component of Economic?

economy growth, interest rate, inflation rate, unemployment rate, availability of employable labor, exchange rates

Example of key component of Sociocultural?

lifestyle preferences and trends, influence of religion/cultural norms/national identity, policies affecting working age/equality/social support, consumerism vs saving perspectives

Example of key component of Technological?

R&D funding/support for businesses, maturation of existing technology, intellectual property protection, disruptive future technologies

Example of key component of Environmental?

environmental protection and laws, individual perspectives and norms on environment

Example of key component of Legal?

strength of rule of law and court systems, consumer protection laws, labor laws, health and welfare laws

7 types of organizational structures

Sole Proprietorship, Partnership, Limited Liability Company (LLC), Corporation, S-Corp, Cooperative, Nonprofit Organization

What is a Sole Proprietorship? Advantages and disadvantages? Example?

— business owned by one person

advantages: freedom, low startup cost

disadvantages: unlimited liability

example: Bob’s Coffee Cart

What is a Partnership? Advantages and disadvantages? Example?

— business with two or more owners who share the operation of the firm and the financial responsibility for its debts

advantages: ability to grow by adding new talent, easier to borrow money

disadvantages: unlimited liability, lack of continuity, difficulty in transferring ownership

example: Ben & Jerry’s

What is a Limited Liability Corporation (LLC)? Advantages and disadvantages? Example?

— hybrid of a publicly-held corporation and a partnership

advantages: limited liability, owners are taxed like partners

disadvantages: members must pay self-employment taxes, limited lifespan

Example: Tito’s

What is a Corporation? Advantages and disadvantages? Example?

— business that is legally considered an entity separate from its owners

advantages: limited liability

disadvantages: double taxation, tender offer

example: Hobby Lobby for closely held, Apple for publicly held

What is an S-Corp? Advantages and disadvantages? Example?

— organized and operated like a closely-held corporation (stock held by few people), but treated as a partnership for tax purposes.

advantages: does not pay corporate taxes, limited liability, continuity

disadvantages: strict eligibility requirements (100+ shareholders)

example: Minglewood Associates

What is a Cooperative? Advantages and disadvantages? Example?

— form of ownership in which a group of sole proprietorships or partnerships agree to work together for common benefits

advantages: greater production and market power

disadvantages: have to serve the specific needs for all members, limited decision-making

example: Ocean Spray

What is a Nonprofit Organization? Advantages and disadvantages? Example?

— business entity that operates for a purpose other than profit

advantages: exempt from federal tax and local tax, can get donations

disadvantages: strict regulations, limited founder control, reliant on donations

example: American Red Cross

What do Dual Shares allow for? What companies have them?

allow companies to access public capital without sacrificing control

Alphabet, Ford, Meta, Berkshire Hathaway, and more use them

Class A Dual Share (alphabet company)

shares are reserved for regular investors and have one vote per share

Class B Dual Share (alphabet company)

shares are reserved for founders and executives. they have 10 times as many votes as Class A shares

Class C Dual Share (alphabet company)

shares come with zero voting rights

Board of Directors (in a Corporation)

elected by the shareholders

governing body of the corporation; represent shareholders’ interests by providing oversight, direction, and governance

has internal directors and external directors

CEO (in a board of directors)

appointed by Board of Directors

Internal directors (C-suite) report to this person

Public Company

company whose shares are bought and sold by the general public

Public companies are required to file with __________________

the Securities and Exchange Commission (SEC)

Two types of offerings for public company shares

IPO (initial public offering) and SEO (secondary equity offering)

What is an Exchange? Examples?

centralized marketplace where securities/shares are traded

NYSE, NASDAQ

What is OTC?

decentralized marketplace where securities/shares are traded without the use of a central exchange or third party

Why would a private company become a public company (i.e. file with the SEC)?

If its shareholder base becomes too large

When is a private company required to become a public company (i.e. file with the SEC)? Who did this when their number of shareholders exceeded 500?

If it has at least 2000 total shareholders or 500 non-accredited investors AND total assets exceeding $10 million

Facebook did this.

Debt

involves borrowing money and paying it back, plus interest

considered safer and less volatile than equity, but offers a more modest return

Equity

involves selling a portion of the business to investors in exchange for money; doesn’t require repayment of the funds, but the investors share in the company’s risk and rewards

considered riskier and more volatile than debt, but can potentially offer higher returns

Glass Ceiling

a metaphor for the invisible barriers that prevent women (and minorities) from advancing in their careers

Glass Cliff

a metaphor for the fact that women are over-represented in precarious, scapegoat leadership positions

Three Questions whose choices affect competitive advantage and stakeholders: The Business Landscape

What do we, as a company, aspire to be?

Where do we choose to compete?

How do we compete in our markets?

Value

perceived benefits and costs associated with an item

Helps benchmark a customer’s willingness to pay

The 5 P’s of Marketing

Product, Price, Place, Promotion, People

1. Product

the goods or services offered to meet customer needs

includes: features, quality, branding, packaging

2. Price

the amount of money customers must pay for the product

includes: profit, costs, demand, segmentation, competition, market share objectives

3. Place

distribution channels, location, logistics, market coverage

4. Promotion

the activities that communicate the products’ benefits and persuade customers to purchase

includes: advertising, public relations (PR), social media, sales promotions

5. People

refers to everyone involved in product’s creation, sale, customer experience

includes: employees (on all fronts) and customers

Market Research is…

the process of gathering, analyzing, and interpreting information about a market, including information about the target audience, competitors, and industry trends

Market Research helps businesses understand…

customer needs, preferences, and behaviors, allowing them to make informed decisions about product development, marketing strategies, and sales

Forms of Market Research

surveys, interviews, focus groups, analyzing existing data, etc

Buyer Decision Process (5 steps)

1. Recognition of Need

2. Information Search

3. Evaluation of Alternatives

4. Purchase Decision

5. Post-Purchase Evaluation

Influencing Factors in Buyer Decision Process

cultural, social, personal, psychological

6 Steps of Successful Research Process

1. Define Problem and Objectives

2. Research Design

3. Data Collection

4. Data Processing

5. Data Analysis

6. Market Research Report and Presentation

Branding

the process of creating a unique identity for a product or company through elements like name, logo, design, and messaging

helps differentiate the product from competitors and builds recognition, trust, emotional connections with consumers

when done effectively, it influences customer perceptions and can drive loyalty and preference

Four Parts of a Brand’s Reputation

Brand Awareness, Perceived Quality, Brand Loyalty, Brand Associations

High Brand Equity

customers recognize, prefer, and trust the brand

(often leads to increased sales, loyalty, and ability to charge premium prices)

Brand Positioning

how a brand wants to be seen by its audience

also known as a unique space a brand occupies in the minds of consumers relative to competitors

Key Elements of Brand Positioning

target audience, competitive frame of reference, unique selling proposition (USP), brand promise

STP (Segmentation, Targeting, Positioning)

divides the market, identifies and targets groups of customers, positions your products/services to them

Break-even point definition

the number of unit sales at which total revenue equals total costs, resulting in neither profit nor loss

Break-even point formula

Break-even point (# units) = Fixed costs / (selling price per unit - variable cost per unit)

Break-even point formula example

Fixed costs: 3000 rent, 5000 salaries, 500 utilities, 500 depreciation

Variable costs per Cup: $1 beans, $0.50 milk and sugar, $0.30 cups/lids/sleeves

selling for $5 per cup

break-even point (#units) = 9000 / (5-1.80)

break-even point (#units) = 2812.5

break-even point (#units) = $2813 (always round up!)

2 objectives to determine price

profit maximization and market share

Fixed costs

costs that remain constant regardless of production or sales

Variable Costs

costs that change directly with production or sales volume

Mixed (semi-variable) Costs

costs with fixed and variable components

ex. utility bill: fixed base charge + variable charge based on usage

Step Costs

costs that are fixed up to a point, then increase in steps after that

ex. if additional staff members are hired once a certain level of production is achieved, labor costs become a “stepped” fixed cost

Time Frame Costs

costs that may be fixed in the short term, but variable in the long term

ex. salaries are fixed per month, but salaries could vary in the long term due to business scale and needs

Price Discrimination

the practice of charging different prices to different customers for the same product/service, where the price differences are not justified by corresponding cost differences

aims to capture consumer surplus and maximize revenue by aligning prices near consumers’ willingness to pay

no issue with this (unless illegal)

Examples of Price Discrimination

airline tickets (different prices based on time, flexibility, business/leisure

movie tickets (discounted tickets for students, seniors, military)

software licenses (special pricing for schools, businesses, students)

How can Price Discrimination be illegal, and what are examples?

if it violates antitrust laws, consumer protection regulations, anti-discrimination laws

examples: price fixing, predatory pricing, discrimination based on protected characteristics, price gouging

Accounting

a comprehensive system for collecting, analyzing, communicating financial information to a firm’s internal and external stakeholders

Financial accounting

external information

Managerial accounting

internal information

Is managerial accounting information available publicly?

No, it is internal

Is financial accounting information from a PRIVATE company available publicly?

no, firms are not required to release it publicly in the US

Is financial accounting information from a PUBLIC company available publicly?

yes, firms are required to required to release it publicly and it must be audited

can be found on Investor Relations Page, SEC webpage, data consolidators

What is the Accounting Equation? Why is it always balanced?

assets = liabilities + equity

it’s always balanced due to double-entry bookkeeping

Asset

a present right of the entity to an economic benefit

Liability

a present obligation of an entity to transfer an economic benefit

Equity

the residual interest in the assets of an entity that remains after deducting its liabilities

Balance Sheet

provides a snapshot of an organization’s financial condition at a specific point in time

summarizes assets, liabilities, equity

Income Statement

summarizes a company’s revenues, expenses, profits, losses over a specific period of time

provides insight into financial performance and profit-generating ability

Statement of Cash Flows

provides detailed breakdown of a company’s cash inflows and outflows over a specific period of time

highlights company’s ability to generate cash, manage activities, maintain liquidity

3 Profitability Ratios

1. Gross Profit Margin

2. Net Profit Margin

3. Return on Assets (ROA)

1. Gross Profit Margin

(Gross Profit / Revenue) x 100%

how efficiently a company produces its goods

>30% is good

2. Net Profit Margin

(Net Income / Revenue) x 100%

indicates percentage of revenue left after all deductions

>10% is good

3. Return on Assets (ROA)

(Net Income / Avg Total Assets) x 100%

how efficiently a company uses its assets to generate profit

>10% is good

Next 2 Ratios

4. Liquidity: Current Ratio

5. Solvency: Debt to Equity Ratio

4. Currency Ratio

(current assets / current liabilities)

a company’s ability to cover short-term liabilities with its short-term assets

1-3 is good

5. Debt to Equity Ratio

(total liabilities / shareholders’ equity)

the degree to which debt is used to finance the company

1-2 is good

2 Efficiency Ratios

6. Inventory Turnover

7. Accounts Receivable (AR) Turnover

6. Inventory Turnover

(cost of goods sold / avg inventory)

how efficiently a company manages its inventory

2-4 is good, 4+ is great

7. Accounts Receivable (AR) Turnover

(net credit sales / avg AR)

how efficiently a company collects its receivables

7-8 is good